§815. Distributions to shareholders from pre-1984 policyholders surplus account

(a) General rule

In the case of a stock life insurance company which has an existing policyholders surplus account, the tax imposed by section 801 for any taxable year shall be the amount which would be imposed by such section for such year on the sum of-

(1) life insurance company taxable income for such year (but not less than zero), plus

(2) the amount of direct and indirect distributions during such year to shareholders from such account.

For purposes of the preceding sentence, the term "indirect distribution" shall not include any bona fide loan with arms-length terms and conditions.

(b) Ordering rule

For purposes of this section, any distribution to shareholders shall be treated as made-

(1) first out of the shareholders surplus account, to the extent thereof,

(2) then out of the policyholders surplus account, to the extent thereof, and

(3) finally, out of other accounts.

(c) Shareholders surplus account

(1) In general

Each stock life insurance company which has an existing policyholders surplus account shall continue its shareholders surplus account for purposes of this part.

(2) Additions to account

The amount added to the shareholders surplus account for any taxable year beginning after December 31, 1983, shall be the excess of-

(A) the sum of-

(i) the life insurance company's taxable income (but not below zero),

(ii) the small life insurance company deduction provided by section 806, and

(iii) the deductions for dividends received provided by sections 243, 244, and 245 (as modified by section 805(a)(4)) and the amount of interest excluded from gross income under section 103, over

(B) the taxes imposed for the taxable year by section 801 (determined without regard to this section).

If for any taxable year a tax is imposed by section 55, under regulations proper adjustments shall be made for such year and all subsequent taxable years in the amounts taken into account under subparagraphs (A) and (B) of this paragraph and subparagraph (B) of subsection (d)(3).

(3) Subtractions from account

There shall be subtracted from the shareholders surplus account for any taxable year the amount which is treated under this section as distributed out of such account.

(d) Policyholders surplus account

(1) In general

Each stock life insurance company which has an existing policyholders surplus account shall continue such account.

(2) No additions to account

No amount shall be added to the policyholders surplus account for any taxable year beginning after December 31, 1983.

(3) Subtractions from account

There shall be subtracted from the policyholders surplus account for any taxable year an amount equal to the sum of-

(A) the amount which (without regard to subparagraph (B)) is treated under this section as distributed out of the policyholders surplus account, and

(B) the amount by which the tax imposed for the taxable year by section 801 is increased by reason of this section.

(e) Existing policyholders surplus account

For purposes of this section, the term "existing policyholders surplus account" means any policyholders surplus account which has a balance as of the close of December 31, 1983.

(f) Other rules applicable to policyholders surplus account continued

Except to the extent inconsistent with the provisions of this part, the provisions of subsections (d), (e), (f), and (g) of section 815 (and of sections 819(b), 6501(c)(6), 6501(k), 6511(d)(6), 6601(d)(3), and 6611(f)(4)) as in effect before the enactment of the Tax Reform Act of 1984 are hereby made applicable in respect of any policyholders surplus account for which there was a balance as of December 31, 1983.

(g) Special rules applicable during 2005 and 2006

In the case of any taxable year of a stock life insurance company beginning after December 31, 2004, and before January 1, 2007-

(1) the amount under subsection (a)(2) for such taxable year shall be treated as zero, and

(2) notwithstanding subsection (b), in determining any subtractions from an account under subsections (c)(3) and (d)(3), any distribution to shareholders during such taxable year shall be treated as made first out of the policyholders surplus account, then out of the shareholders surplus account, and finally out of other accounts.

(Added Pub. L. 98–369, div. A, title II, §211(a), July 18, 1984, 98 Stat. 747 ; amended Pub. L. 99–514, title X, §1011(b)(10), title XVIII, §1821(k)(1), (2), Oct. 22, 1986, 100 Stat. 2389 , 2841; Pub. L. 100–647, title I, §1010(j)(1), Nov. 10, 1988, 102 Stat. 3456 ; Pub. L. 108–357, title VII, §705(a), Oct. 22, 2004, 118 Stat. 1549 .)

References in Text

The enactment of the Tax Reform Act of 1984, referred to in subsec. (f), means the enactment of division A of Pub. L. 98–369, which was approved July 18, 1984.

Prior Provisions

A prior section 815, added Pub. L. 86–69, §2(a), June 25, 1959, 73 Stat. 129 ; amended Pub. L. 87–790, §3(b), Oct. 10, 1962, 76 Stat. 808 ; Pub. L. 87–858, §3(b)(4), (e), Oct. 23, 1962, 76 Stat. 1137 ; Pub. L. 88–571, §§2, 3(a), 4(a), Sept. 2, 1964, 78 Stat. 857 , 859; Pub. L. 90–225, §4(a), (b), Dec. 27, 1967, 81 Stat. 733 , 734; Pub. L. 91–172, title IX, §907(b), Dec. 30, 1969, 83 Stat. 715 ; Pub. L. 94–331, §1(a), June 30, 1976, 90 Stat. 781 ; Pub. L. 94–455, title XIX, §§1901(b)(1)(O), (24), (33)(H), 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1791 , 1798, 1801, 1834, contained provisions similar to this section, prior to the general revision of this part by Pub. L. 98–369, §211(a).

Amendments

2004-Subsec. (g). Pub. L. 108–357 added subsec. (g).

1988-Subsec. (c)(2). Pub. L. 100–647 inserted at end "If for any taxable year a tax is imposed by section 55, under regulations proper adjustments shall be made for such year and all subsequent taxable years in the amounts taken into account under subparagraphs (A) and (B) of this paragraph and subparagraph (B) of subsection (d)(3)."

1986-Subsec. (a). Pub. L. 99–514, §1821(k)(2), inserted at end "For purposes of the preceding sentence, the term 'indirect distribution' shall not include any bona fide loan with arms-length terms and conditions."

Subsec. (c)(2)(A)(ii). Pub. L. 99–514, §1011(b)(10), substituted "small life insurance company deduction" for "special deductions".

Subsec. (f). Pub. L. 99–514, §1821(k)(1), inserted reference to section 819(b).

Effective Date of 2004 Amendment

Pub. L. 108–357, title VII, §705(b), Oct. 22, 2004, 118 Stat. 1549 , provided that: "The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 2004."

Effective Date of 1988 Amendment

Pub. L. 100–647, title I, §1010(j)(2), Nov. 10, 1988, 102 Stat. 3456 , provided that: "The amendment made by paragraph (1) [amending this section] shall apply to taxable years beginning after December 31, 1986."

Effective Date of 1986 Amendment

Amendment by section 1011(b)(10) of Pub. L. 99–514 applicable to taxable years beginning after Dec. 31, 1986, see section 1011(c)(1) of Pub. L. 99–514, set out as a note under section 453B of this title.

Amendment by section 1821(k)(1), (2) of Pub. L. 99–514 effective, except as otherwise provided, as if included in the provisions of the Tax Reform Act of 1984, Pub. L. 98–369, div. A, to which such amendment relates, see section 1881 of Pub. L. 99–514, set out as a note under section 48 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1983, see section 215 of Pub. L. 98–369, set out as a note under section 801 of this title.

Operations Loss Deduction of Insolvent Companies May Offset Distributions From Policyholders Surplus Account

Pub. L. 99–514, title X, §1013, Oct. 22, 1986, 100 Stat. 2395 , provided that:

"(a) In General.-If-

"(1) on November 15, 1985, a life insurance company was insolvent,

"(2) pursuant to the order of any court of competent jurisdiction in a title 11 or similar case (as defined in section 368(a)(3) of the Internal Revenue Code of 1954 [now 1986]), such company is liquidated, and

"(3) as a result of such liquidation, the tax imposed by section 801 of such Code for any taxable year (hereinafter in this subsection referred to as the 'liquidation year') would (but for this subsection) be increased under section 815(a) of such Code,

then the amount described in section 815(a)(2) of such Code shall be reduced by the loss from operations (if any) for the liquidation year, and by the unused operations loss carryovers (if any) to the liquidation year (determined after the application of section 810 of such Code for such year). No carryover of any loss from operations of such company arising during the liquidation year (or any prior taxable year) shall be allowable for any taxable year succeeding the liquidation year.

"(b) Definitions.-For purposes of subsection (a)-

"(1) Insolvent.-The term 'insolvent' means the excess of liabilities over the fair market value of assets.

"(2) Loss from operations.-The term 'loss from operations' has the meaning given such term by section 810(c) of such Code.

"(c) Effective Date.-This section shall apply to liquidations on or after November 15, 1985, in taxable years ending after such date."

Plan Amendments Not Required Until January 1, 1989

For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of Pub. L. 99–514 require an amendment to any plan, such plan amendment shall not be required to be made before the first plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. L. 99–514, as amended, set out as a note under section 401 of this title.

Amount of Indirect Distribution for Loans Before March 1, 1986; Determination; Exception

Pub. L. 99–514, title XVIII, §1821(k)(3), Oct. 22, 1986, 100 Stat. 2841 , provided that: "In the case of any loan made before March 1, 1986 (other than a loan which is renegotiated, extended, renewed, or revised after February 28, 1986), which does not meet the requirements of the last sentence of section 815(a) of the Internal Revenue Code of 1954 [now 1986] (as added by paragraph (2)), the amount of the indirect distribution for purposes of such section 815(a) shall be the foregone interest on the loan (determined by using the lowest rate which would have met the arms-length requirements of such sentence for such a loan)."